What Is a Credit Score and Why Does It Matter?
What’s in a number? When it comes to credit scores, a lot. Your credit score plays a major role in your financial life — from the interest rates you receive on loans and credit cards to your insurance premiums. It can even affect your ability to rent an apartment or get a cell phone contract.
If credit scores feel intimidating or confusing, you’re not alone. The good news is you don’t need to be an expert to take control, and we’re here to help explain the basics, so you can move forward with confidence.
What is a credit score?
Your credit score is a number (usually between 300 and 850) that rates how likely you are to repay debt and pay bills on time. The higher the score, the better.
Why Is a Credit Score Important?
When you apply for a loan or credit card, lenders review your score to help decide if they’ll lend to you and what your rate will be. Other businesses may use your score to determine your eligibility and pricing, such as insurance companies, phone and internet providers, utility companies, and even landlords and employers.
How Is My Credit Score Calculated?
Credit scores are determined by factors such as payment history, the types of loans and credit cards you have, how long you’ve had your accounts, and how much credit you use. Each credit reporting agency uses slightly different calculations to determine your credit score, so it’s normal for your score to vary depending on which method is used.
It’s important to note that your score is NOT impacted by your race, religion, income, marital status, or the balance in your checking or savings account. If you’re married, your spouse’s credit score and personal information do not impact your score either.
What score do I need to get a loan?
To qualify for a personal loan, you typically need a score around 600 or higher. Auto loans usually require a score of 660 or higher. For a conventional mortgage, you’ll likely need a score of 620 or higher. Keep in mind, the most favorable rates and terms go to borrowers with very good to excellent credit, in the 700s and 800s.
How can I improve my score?
The most important step you can take is to pay your loans and bills on time, every time. Other key habits include keeping your credit utilization below 30%, keeping older accounts open when possible, and paying down existing debt.
Don’t feel discouraged if you don’t see instant results – improving your score takes time, but you can get there!
Need help with your credit score?
Understanding your credit score is an important first step toward financial success. Visit a branch or get in touch with our team to discuss your financial situation and goals. We’ll help you review your credit score and explore ways you can improve it.
